Borrowing up this Christmas, as one in four feel pressure to overspend

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More Britons are borrowing money to pay for Christmas costs than last year and one in four is feeling under pressure to overspend, according to new research from National Debtline, run by the Money Advice Trust. The debt advice charity says that with underlying borrowing increasing rapidly, many households risk falling into financial difficulty in January.

A poll of more than 2,000 British adults conducted for the Money Advice Trust by YouGov showed an increase in the proportion of people turning to credit to cover the costs of Christmas presents and even food.

Borrowing moreMore than a third of Britons surveyed (35 percent) have already borrowed or plan to borrow to pay for Christmas presents this year. This equates to an estimated 17.3 million people – up 0.4 million on the same time last Christmas. The number of Britons turning to credit to pay for food at Christmas has risen even more steeply to nearly a quarter (23 percent), equating to an estimated 11.5 million people. This represents an increase of 1.1 million on last year.

Pressure to spendThe research also reveals the pressure that Britons are facing to spend more than they originally planned this Christmas. Almost a quarter of Britons surveyed (23 percent) said they felt under pressure to spend more, with pressure from children (seven percent), Black Friday and similar promotions (six percent) and partners and other relatives (both four percent) cited as common factors.

Shift from catalogues to overdraftsThe research also found a far lower use of catalogues this Christmas, with more people turning to overdrafts and credit cards than in 2014. The findings suggest an estimated 1.9 million Britons are taking out catalogue credit to buy presents, down from 2.6 million in 2014 – but that hundreds of thousands more are turning to overdrafts for Christmas costs. An estimated 3.2 million people are going into the red to buy presents, with 2.1 million dipping into overdrafts to pay for festive food – up from 2.9 million and 1.6 million respectively.

Advisers at National Debtline are expecting demand for debt advice to rise significantly in the New Year. Last Christmas, the number of calls to National Debtline jumped by 61 percent after the holiday as households came to grips with extra borrowing. The charity believes that underlying increases in borrowing in the economy this year will see this jump surpassed in 2016.

Figures from the Bank of England released last week showed a significant increase in consumer credit, which the Bank’s chief economist Andy Haldane has warned is now rising “at a rate of knots”. Consumer credit increased by £1.2 billion in October and has risen 8.2 percent over the last year – the fastest growth since 2006. These figures do not take into account most Christmas spending, including the £3 billion spent by consumers on Black Friday and Cyber Monday.

“The number of us putting Christmas on credit is rising, and while most households will be able to pay this extra borrowing off, many are at risk of falling into difficulty in the New Year.

“The fact that so many people are feeling under pressure to spend more than they originally planned shows what a difficult time of year this can be. With underlying borrowing having risen sharply over the last year, we are concerned that this extra Christmas spending will be the last straw for many household budgets.

“This is of course particularly true for many low-income households. They will at least now be able to enjoy Christmas without receiving letters telling them their tax credits are to be reduced in April, as was looking likely. While the Chancellor’s decision to scrap this measure is very welcome, however, this must not lead us to underestimate the precarious financial position that many households are facing as 2015 draws to a close.

“At National Debtline we are ready to offer free, independent advice to anyone in financial difficulty – and our advice to anyone struggling to cope, whether before Christmas or in the New Year, is to get in touch as soon as possible.”

To raise awareness of the extra pressures facing households this Christmas, National Debtline is using the hashtag #MakingChristmasCount to share people’s stories of their favourite thoughtful Christmas presents. More than one in five Britons surveyed (21 percent) by the charity are reducing the cost of Christmas gifts this year, including just buying for children (nine percent), giving handmade presents (six percent) and bringing food and drink for the Christmas table (three percent).